Central Plaza Hotel

Central Plaza Hotel Plc (CENTEL)
2Q13F preview: the year’s bottom. We estimate 2Q13 net profit at Bt198mn, up 21% YoY but down 70% QoQ. The hotel business did well but the food business less well. Highlights:
- Hotel business: We estimate RevPar grew 9% YoY organically in 2Q13 mainly from a higher occupancy rate of 75% (from 65% in 2Q12) while ARR was relatively flat. Including a resort in Maldives, Centara Grand Island Resort & Spa Maldives, which has begun consolidation this year, RevPar grew 35% YoY. EBITDA margin is expected to decline to 22% (from 25% in 2Q12) from the start-up cost of the second resort in Maldives, Centara Ras Fushi Resort & Spa Maldives, which opened in March this year and the effect of the consolidation of the first resort in Maldives.
- Food business: We estimate food revenue growth at 12% YoY and 11% QoQ from:
1) same-store sales growth (SSSG) in 2Q13 of 2.2%, down from 10.9% in 2Q12 and 3.2% in 1Q13 and 2) outlet expansion, with 704 outlets as of June 2013 vs. 634 at the same period last year. EBITDA margin is expected to be flat YoY at 15% as the magnitude of the rise in staff expense is lower.
Management bullish on hotel business. Management guided that, despite being low season, July’s Revpar growth was strong at 12% (or 29% YoY including the first resort in Maldives) boosted by a high occupancy rate of 83% from 73% in July last year. Although there is concern about political tension, CENTEL has not seen any negative impact, such as cancelations, so far. The strong occupancy rate has led it to raise its 2013 occupancy rate target to 77% from 73%, though it maintains ARR growth at 17% (from the consolidation of the first resort in Maldives), giving 29% RevPar growth, up from 20%.
Food to be better in 2H13. CENTEL is standing by its 2013 food target of SSSG at 4% and total food revenue growth at 15%. Its concern about a consumption slowdown is being met with more active marketing by way of promotions plus outlet expansion in key food brands KFC, Mister Donut and Auntie Anne’s to boost revenues in 2H13. CENTEL has announced its latest food brand, Tenya, a Japanese restaurant specializing in tempura, and plans to have two to three outlets by the end of this year. CENTEL is looking for an opportunity to acquire another food brand, like Ootoya in 2011, to strengthen its food business.
Maintain BUY at 2013 TP at Bt43/share. We believe the 2Q13 will mark the bottom of the year, with earnings improvement seen in 3Q13, underwritten by the continued strong momentum for the hotel business and better operations at the food business. We maintain BUY with 2013 TP at Bt43/share.